Permissioned vs Permissionless: Why Polygon Is Telling the EU to Know the Difference

European regulators need to understand the difference between permissioned and permissionless systems, Polygon Labs said in an open letter published Monday. 

Polygon is calling for the European Parliament to amend Article 30 of the Data Act to clarify that permissionless systems are excluded from certain regulations. 

Specifically, Polygon would like to see the language updated to “ensure it accounts for the ways in which smart contracts operate and the potential negative consequences of imposing a requirement for ‘safe termination or interruption’ of such smart contracts in permissionless systems,” the team wrote in the letter. 

Only “enterprises” with an “identifiable natural person or corporate entity” should be subject to Data Act regulations, Polygon said. 

The company claimed that Article 30, as it currently stands, is in opposition to the European Union’s other crypto-related policies, most notably the markets in crypto-assets (MiCA) regulations in Europe, which are poised to pass this month.

MiCA, in its most recent draft, excludes “fully decentralized” crypto asset services from regulations outlined in the policy, Polygon noted. 

“Art. 30 should remain consistent with MiCA in keeping decentralized, autonomous systems out of regulatory scope,” the letter added. 

Crypto wallet provider Ledger is also in support of Polygon’s proposed Article 30 changes, Polygon Chief Policy Officer Rebecca Rettig said. 

“We will continue to engage constructively with policymakers and regulators in the EU (and beyond) to ensure that any regulation is evergreen, can grow with the innovation & also build sufficient guardrails for users of blockchain-based software,” Rettig added on Twitter. 

It’s not the first time the crypto industry has expressed concern about regulators’ approach to DeFi. When the Office of Foreign Asset Control (OFAC) sanctioned crypto mixing service Tornado Cash, crypto policy groups spoke out and Tornado Cash users joined forces to sue the government, claiming a software cannot be sanctioned. 

Polygon invited European regulators to respond and comment on its amendment proposal, the letter said.

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